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Experts doubt legality of online auction

By Wang Zhenghua (China Daily)

10:50, July 16, 2012

Industry insiders and legal experts on Thursday raised doubts over the legality of the country's first online auction for property seized by the courts.

The people's courts in Beilun and Yinzhou, two districts of Ningbo, Zhejiang province, this week put two seized vehicles up for auction on Taobao, a major online marketplace.

One was a BMW sedan, which sold for 330,900 yuan ($52,000) after 53 rounds of bidding, while the other was a Mitsubishi Outlander SUV that sold for 67,000 yuan.

Both auctions lasted from 10 am on Monday until 10 pm on Tuesday and were hailed as attempts by Zhejiang High People's Court to create a fairer and more transparent system for dealing with property confiscated from convicted criminals.

Unlike traditional court sales, buyers on Taobao did not need to pay a commission, which has been an area ripe for corruption in typical auctions.

However, Ouyang Shuying, deputy secretary-general of the China Association of Auctioneers, said on Thursday the online auctions violated laws and regulations on judicial sales, and warned that such activities could disturb the market order.

Zhejiang High People's Court has said it plans to expand the online auction to 19 grassroots courts across major cities, including the provincial capital Hangzhou, as well as Wenzhou and Shaoxing.

"Taobao is not a qualified auctioneer," Ouyang said, adding that only companies approved by industry authorities and his association can carry out online judicial sales.

She said the association, which counts more than 2,000 auction companies nationwide as its members, has been in contact with the Supreme People's Court, the Ministry of Commerce and other organizations about the matter.

A spokesman for Zhejiang High People's Court could not be reached for comment on Thursday. However, a notice on the court's website hailed this week's auctions as a success.

"More than 90 percent of 325 Web users polled by a portal website said they support the auction on Taobao and say it could increase transparency and prevent under-the-table operations," the notice said, without naming the website.

Shen Cheng of Taobao, who was in charge of the two auctions, said there were no questions about the legality of the auctions.

"Same as any other online traders, Taobao served as a third-party platform," he said. "The court was the main body during the auction from the beginning to the end. The court's legality is beyond doubt."

Court auctions have traditionally been carried out by third parties in brick-and-mortar auction houses, where buyers are required to pay a commission to auction companies.

According to Ouyang from the China Association of Auctioneers, auction companies charge buyers a commission of between 0.5 and 5 percent of the value of the item.

The auction for property seized by courts accounted for 13 percent of auction houses' businesses on average in 2011, Ouyang said, although some firms said judicial sales could take a 40 percent share of all its auctioning business volume.

Some auction companies have also launched online auctions, but unlike Taobao they charge commission fees, which Ouyang said she views as proper.

"Taobao is not doing this for free like a charity initiative," Ouyang said. "It might get some subsidy. From whom I don't know."

Several legal experts said the two courts have made a good attempt at bringing about fair and transparent judicial auctions, but they need legal support.

"Taobao is an excellent trading platform, but it should gain legal permission first before running the judicial online auction business," said Yu Guofu, a lawyer at Shengfeng Law Firm in Beijing.

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